The rock star of Corporate America

Steve Jobs has catapulted Apple to the top of the tech heap

By

RussBritt

LOS ANGELES (MarketWatch) — Steve Jobs is known as both mercurial and visionary, part rock-star CEO and part master salesman, a meticulous micromanager who can drive his employees to distraction — and one of the most important figures in American industry in the past half-century.

Jobs’s tenure as the chief executive at Apple Inc.
AAPL, -3.96%
during the past 10 years is well-documented. After pulling his own company back from the brink of bankruptcy before the decade started, he almost single-handedly went on to save the recording industry with the iPod and iTunes.

He revolutionized handheld devices and touch-screen technology with the iPhone. And he may well usher in a post-PC era of computing with his latest gadget, the iPad.

“The resurrection of Apple is just the most astounding story that’s probably happened in business in at least a decade — you might be able to go further and say it’s a half-century,” says Roger Kay, president of Endpoint Technologies, a technology-industry think tank. “It’s on par with Thomas Edison and Alexander Graham Bell in terms of its total impact.”

Jobs’s legacy stretches back several decades and includes the development of a few more groundbreaking innovations from his first go-round at Apple in the 1970s and ’80s: the Apple II, the Mac and elaborate computer graphics, to name a few. Along with being likened to Edison and Bell, comparisons with such captains of industry as Walt Disney — of whose namesake company Jobs would later become the biggest individual shareholder — spring to mind for many.

And he has driven Apple to the top of the heap in technology. The company ranks No. 1 in the sector in market cap at $285 billion. That’s greater than longtime rival Microsoft Corp.
MSFT, -3.39%
whose value today stands at around $220 billion. Investors who plunked down $1,000 on Apple stock at the end of 2000 would have seen it grow to nearly $43,000 by the end of the decade.

With Jobs’s mantras of putting the customer first and of desiring nothing more than to make great products ruling the day at Apple, consumers have been as delighted as investors. For the Apple faithful, the decade was a virtual orgy of technological wonderment, marked by marvel after marvel, alongside several inventions that rewrote the books.

He also oversaw a big expansion of the company, hiring tens of thousands of workers as the company’s ranks swelled to more than 46,000 from about 8,500 at the start of the decade. Revenue skyrocketed.

For those reasons and more, Jobs has been named MarketWatch’s CEO of the Decade.

The Jobs report

There have been low points, though. The decade began with jarring tales of Jobs, in a few rare instances, roaming the Apple corridors firing workers seemingly at random, but by all accounts employees have settled in with the boss many in Silicon Valley call a virtual rock star because of the adulation he enjoys among Apple fans. And they’re no doubt pleased that their stock options are up stratospherically.

Corporate governance remains a question mark, though watchdogs say the company is becoming more conscientious. One bugaboo that remains is the question of succession.

While Jobs has conquered some well-publicized adversity — first, by earning a return trip to the top job at Apple, and then twice more during his current tenure, battling two bouts with serious illness — it remains unclear what would happen if he were forced to depart. The company remained tight-lipped about his health throughout his illnesses, a stance that troubled investors and corporate-governance experts. At Jobs’s insistence, it continues to do so.

Still, for many Jobs has come pretty close in the past decade to accomplishing what he set out to do all those years ago when he and Steve Wozniak first started fiddling with electronics as youths before there even was a Silicon Valley: making an indelible mark on technology, and on the world.

Thriving as others struggled

During the first decade of the new millennium, Jobs and Apple managed to thrive even when the rest of the country didn’t. Apple’s shares blossomed, pausing only when Jobs’s health was in doubt. While the stock trades at roughly 43 times its level of a decade ago, the S&P 500 has lost about 7%.

Sales are up twelvefold from the end of 2000, surging from $5.4 billion for fiscal 2001 to $65.2 billion for fiscal 2010, which ended in September. Cumulatively, Apple has racked up more than $229 billion in total sales during the decade.

“He has marketed himself and the value of Apple extraordinarily well over the last 15 years,” says Jeffrey Young, co-author of the unauthorized biography “iCon Steve Jobs: The Greatest Second Act in the History of Business.”

“In an economically depressed era, you pay a few bucks more and you can have an Apple experience,” says Young. “It’s a marginal extra cost that gives you cachet at a time when there’s very little cachet you can get out there in the universe.”

Along the way, Jobs also ran another hugely successful company for much of the decade, Pixar Animation Studios. Pixar has had an uninterrupted string of blockbuster hits since its first release, “Toy Story,” in 1995, followed by such instant classics as “Monsters Inc.,” “Finding Nemo” and “Up.” Jobs sold Pixar to the Walt Disney Co.
DIS, -0.66%
in 2006 and as a result became the entertainment giant’s largest shareholder and joined the Disney board.

Love him or hate him, Jobs has made an impact on the adoring throngs — Apple acolytes given to near-religious experiences when a new Apple product hits store shelves — and detractors alike.

“Apple’s products are designed from the ground up to sell,” says Rob Enderle, president of the technology analysis firm Enderle Group. “The end result is they get lines around the block for their products when virtually nobody else does.”

Those queues typically culminate in entry to the company’s own bricks-and-mortar — or, more accurately, laminated glass and blasted stainless steel — retail outlets. Initially derided as a desperate measure and a last-ditch strategy shift, the first Apple Stores opened in 2001. Less than six years later, Fortune magazine was hailing Apple as “America’s best shopkeeper.”

Sweating the small stuff

But those successes come at a price. To many observers, Jobs wrote the book on micromanaging, and that’s not meant as a compliment.

There have been numerous stories over the years of his roaming the Apple compound in Cupertino, Calif., uprooting workers and aborting careers. In technology circles, Jobs’s mood swings are the stuff of legend and, in fact, led to his initial ouster from the company in 1985, according to Endpoint’s Kay.

“When he’s in his Mr. Hyde role, he’s just insane,” Kay says. “Dr. Jekyll is the guy who’s making it all happen.”

Adds Enderle: “He is not somebody [who] any one of us would want watching our kids, but, in terms of running the company, he’s excellent.”

Jobs jealously guards both Apple’s secrets and his own privacy, remaining largely inaccessible, and he demands the same of the vastly expanded Apple corps.

True to form, Jobs would not make himself available for an interview with MarketWatch. Company representatives said further that Apple employees would not be allowed to comment in his stead.

Attention to detail

Personality traits aside, how does Jobs do it?

Tracing his roots is unlikely to offer many clues. The adopted son of Paul and Clara Jobs of Redwood City, Calif., he was a college dropout who kept dropping back into classes at Reed College in Oregon when they tickled his fancy.

Jobs has said that one class, in calligraphy, set the stage for his later emphasis on the multiple typefaces that came to distinguish the Mac. At the time, though, he didn’t think it would ever have any practical application. Part of Jobs’s secret is simply following his interests.

“Don’t be trapped by dogma, which is living with the results of other people’s thinking,” Jobs said in a Stanford University commencement speech in 2005. “Don’t let the noise of others’ opinions drown out your own inner voice. And, most important, have the courage to follow your heart and intuition.”

To those who have followed Jobs and Apple over the years, his success is mostly attributable to his attention to detail and the discipline he shows in selecting which products to take to market. But his instincts play a critical role as well.

“Everyone focuses on his incredible successes,” says Alan Deutschman, author of the biography “The Second Coming of Steve Jobs.” “Part of the equation is he’s also had plenty of flops in his career. Part of being so innovative is you have to actually be risk taking. You can’t give lip service to it, like everyone else does.”

A bit of soul searching also may have played a role. When Jobs returned to Apple a decade after his ouster, the longstanding feud between his company and Microsoft Corp.
MSFT, -3.39%
seemed to melt away.

Jobs’s rapprochement with Microsoft was evident in 1997 when Bill Gates’s larger-than-life image appeared on screen at the Macworld conference in Boston. Gates and Jobs came together to announce that Apple — then near bankruptcy — had agreed to load Microsoft’s Office suite as well as Internet Explorer on Macintosh computers. Microsoft made a $150 million investment in Apple at the time.

“We have to let go of this notion,” Jobs said at the time, “that for Apple to win, Microsoft has to lose.”

Religious experience

Jobs needed Microsoft those first few years after he came back to the company. Apple was within one quarter of going under, according to several accounts. Working under the title of interim CEO, Jobs rearranged Apple’s priorities and its focus. A few years later, things started to take off, with the iPod and iTunes as catalysts.

As Apple got its legs, it started selling the iTunes jukebox software in January 2001 and the iPod later that year. Jobs eventually recognized that, in this new media world, constructing barriers between the “Wintel” sphere — computers based on Microsoft’s Windows operating systems and Intel Corp.
INTC, -1.70%
processors — and that of Apple would be a mistake.

Initially, the iTunes software was available only for the Mac, and when the iTunes store opened in April 2003, it, too, was solely for Macs. In October of that year, though, its reach was expanded to include Windows.

“A year or two into it, Steve got the religion,” says Young, the Jobs biographer. “Ever since then, it’s been a rocket.”

The iPod and iTunes indeed launched Apple and Jobs on a decade of unprecedented prosperity, and in the process saved the recording industry from certain doom due to the online pirating of songs. Since then, Apple says it has sold 279 million iPods, for a total of $47.7 billion in revenue. Twelve billion songs along with 7 billion applications have been sold via the iTunes store.

Crawford Del Prete, an analyst with IDC Corp., says that until the iPod and iTunes came along, most technology manufacturers were practically giving away hardware in order to sell software. Apple did the reverse.

“Everybody else approached it like the razor and the razor blades,” he says. “[Jobs] sold the razors and, in effect, gave away the blades.”

Enter the touch screen

A more critical innovation came in 2007 when Apple introduced the iPhone to a cell-phone-crazy public. As Jobs has told it, the iPhone was not what he had in mind at first. He was looking to develop a tablet like the iPad.

Apple, in fact, had developed a predecessor to the iPad in the 1990s, called the Newton, but Jobs killed it. He found the stylus that accompanied the Newton cumbersome and thought touch-screen technology was the way to go.

“What we said at the very beginning was [that] if you need a stylus, you’ve already failed,” Jobs recalled at the All Things Digital conference this June. “And that drove everything.”

Jobs said he asked engineers to start working on multitouch displays in the early 2000s and was presented with a prototype six months later.

“When I saw the rubber-band inertial scrolling and a few of the other things, I thought, ‘My God, we can build a phone out of this.’ And I put the tablet project on the shelf because the phone was more important. And we went and took the next several years and did the iPhone,” Jobs said.

Many of the analysts interviewed for this story contend that the touch-screen technology used in the iPhone is Apple’s most significant innovation of the last decade. To date, Apple says it has sold 73.7 million units for a cumulative $45.6 billion in sales of iPhones and related products and services.

Share performance

CEO

COMPANY

PRICE ON
12/31/00 ($)

PRICE ON
12/3/10 ($)

GAIN (%)

Steve Jobs

Apple
(AAPL)

7.44

316.55

4154.70

Jeff Bezos

Amazon
(AMZN)

15.56

174.95

1024.36

Eric Schmidt

Google
(GOOG)*

85.00

571.97

572.91

Howard Schultz

Starbucks
(SBUX)

11.06

32.42

193.13

Tim Solso

Cummins
(CMI)

9.48

102.53

981.54

* History since IPO on Aug. 19, 2004

It not only revolutionized the so-called smartphone category but set the table for the iPad — and could usher in what Jobs himself refers to as the post-PC era. Forecasts run into the hundreds of millions by 2014. The company says it’s sold 7.5 million units, for $5 billion in revenue, since the tablet device went on the market in April .

“That removes a device between you and your data. The thing that you used to have to deal with, you don’t have to anymore,” says Endpoint’s Kay. “It’s almost like you’re touching the data itself. That’s huge.”

With both the iPhone and iPad, Jobs took the example of iTunes and applied it to his newer devices. The iPhone store now sells more than 300,000 applications, while the iPad is steadily building its library of software options. It’s another example of keeping the Apple hardware in the minds of consumers through the software.

Jobs has said he hopes the iPad can do for the newspaper business what the iPod did for music — that is, save it from extinction. With newspapers hemorrhaging subscribers and losing large chunks of ad revenue to the Internet, iPad applications for the industry could build a new audience.

“The iPad takes us in a different direction, and it’s probably taking us more toward what a blended device might be,” Enderle says.

Post-PC world

This year’s release of the iPad, the only tablet in the tech universe to gain any traction to date, could solidify Apple’s standing in a post-PC world, with greater strength and market share than the minuscule slice it had during most of the PC era.

At the All Things Digital conference this summer, Jobs likened the post-PC era to the days when smaller automobiles took the place of trucks.

“PCs are going to be like trucks. They’re still going to be around. They’re still going to have a lot of value. But they’re going to be used by one of out x number of people,” Jobs said. “This transformation’s going to make some people uneasy — people from the PC world, like you and me. It’s going to make us uneasy because the PC has taken us a long ways.”

Analysts, however, say that Jobs and Apple likely will not dominate the post-PC world. Why? Because they probably won’t want to.

Jobs has carefully constructed Apple’s identity and prefers a smaller organization, towering market cap notwithstanding, that he can actually manage. Many doubt that he, or Apple, could thrive as it has over the past decade if it were to grow to the size of Microsoft or IBM Corp.
IBM, -1.04%

Much of Jobs’s strategic success, in fact, centers around what Apple edits out, rather than solely what stays, according to Van Baker, a tech analyst for Gartner Group Inc. “Apple resists the temptation to proliferate a number of products in the market,” Baker says. “They kill their products faster than anyone else.”

No cannibalism

Because of its consumer-focused strategy, Apple was willing to install iPod media players in its iPhone and later, its iPad. Some observers said that might cannibalize the iPod, but Apple didn’t see it that way.

Apple’s laserlike focus on just a few products has made it a moving target for rivals, who aren’t sure what the company will reject and what it will forge ahead with.

“It’s a high-risk, high-reward strategy. You put things out there, and if one of them fails it’s likely to do some serious damage to your revenue stream,” says Baker. “But Apple is extremely good at executing. They get their products to the market on time.”

Despite Apple’s winning strategies and nearly flawless execution over the past decade, the company has not been unblemished. The incident most commonly mentioned remains a mid-decade stock-option-backdating scandal that embroiled Jobs and other executives. Jobs allegedly received options that had retroactively been given a more advantageous grant date, but the company maintains the CEO never profited from the move, and the Securities and Exchange Commission declined to bring charges against him.

As far as corporate citizenship, Apple and Jobs haven’t always been at the front of the class, analysts say. While Microsoft’s Gates has famously been giving away much of his personal fortune, Jobs hasn’t been known for philanthropy.

Apple also wasn’t known for strong governance but has lifted itself up over the last few years, according to Nell Minow, editor of the Corporate Library.

“[Jobs is] a candidate for most-improved player,” she says. “They seem to be making an effort to do better on corporate governance.”

Red flags

The backdating scandal raised a red flag, as did the $1 a year he takes in salary, which could mask what Jobs actually is getting from the company, Minow says. Hazy forms of compensation such as options and, in one instance, a plane for Jobs, represent causes for concern, she adds.

Apple investors also have been rattled twice by the Jobs health scares and the secrecy surrounding them, making the absence of a succession plan a significant issue, Minow says. He was stricken in mid-2004 with pancreatic cancer, an often fatal malady, but it later was discovered that his was a rare form that was treatable with surgery.

In subsequent public appearances, Jobs appeared gaunt and listless, raising even more concerns about his health. Then, in January 2009, he took a six-month leave of absence, citing a “hormone imbalance,” and handed the day-to-day reins to Chief Operating Officer Tim Cook. Jobs later — and, again, quietly, at least at first — underwent a liver transplant but returned to work in June of that year.

In response to those puzzled, and in many cases disillusioned, by the company’s silence during that tenuous phase, Jobs has insisted he needed to maintain privacy. But, with the company’s own health potentially in jeopardy without him, critics argued that the CEO’s condition ought to have been made public.

Were Jobs unable to continue, is there a successor capable of playing both of Jobs’s key roles at Apple: innovator and master salesman?

Some say that Jobs is irreplaceable but that the company would endure for a number of years in his absence. Developing and executing major new initiatives, however, could quickly cease to go as smoothly as they have under Jobs.

“How many brushes with death does he have to have?” asks Deutschman, the biographer, adding that Jobs’s larger-than-life persona has of late become a detriment to Apple.

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